fair share

[Azazello1313]

To update one of the tables for the next edition of my favorite textbook, I have been looking at the new CBO report on the distribution of income and taxes. I found the following calculations, based on the numbers in the CBO's Table 7, illuminating.

 

Because transfer payments are, in effect, the opposite of taxes, it makes sense to look not just at taxes paid, but at taxes paid minus transfers received. For 2009, the most recent year available, here are taxes less transfers as a percentage of market income (income that households earned from their work and savings):

 

Bottom quintile: -301 percent

Second quintile: -42 percent

Middle quintile: -5 percent

Fourth quintile: 10 percent

Highest quintile: 22 percent

 

Top one percent: 28 percent

 

The negative 301 percent means that a typical family in the bottom quintile receives about $3 in transfer payments for every dollar earned.

 

The most surprising fact to me was that the effective tax rate is negative for the middle quintile. According to the CBO data, this number was +14 percent in 1979 (when the data begin) and remained positive through 2007. It was negative 0.5 percent in 2008, and negative 5 percent in 2009. That is, the middle class, having long been a net contributor to the funding of government, is now a net recipient of government largess.

 

http://gregmankiw.blogspot.com/2012/07/progressivity-of-taxes-and-transfers.html

[Perchoutofwater]

And that is why our country will forever be screwed up. People have realized they can vote themselves more money.

[billay]

The quintiles are defined by income range, no? I'd be curious to see a volume comparison as well. I assume the number of americans in 1979 who fell into the middle quintile was larger?

[Azazello1313]

The quintiles are defined by income range, no? I'd be curious to see a volume comparison as well. I assume the number of americans in 1979 who fell into the middle quintile was larger?

 

huh? a quintile is defined as 20% of the relevant population. I would assume that number has gone up in absolute terms since 1979 due to population growth.

[Azazello1313]

the truth is that middle quintile (or let's say more accurately the middle three quintiles) are incessantly pandered to by politicians because they hold the most votes. they are continually told that they, the middle class, are over-burdened, and the two parties alternately scapegoat the rich and the poor. as a result, we have this sort of situation, where the middle quintile have become net recipients of federal payment, yet they still feel aggrieved because they believe the hucksters telling them they're victims of the fat cats and/or the welfare queens, or the chinese laborer, or whatever. and who knows, maybe in some respects they ARE victims, but certainly not when it comes to who's carrying the water to fund government.

[CaP'N GRuNGe]

 

 

Something is clearly wrong here because I have a friend and there are also many others here it seems who have this firm believe that Obama has raised their taxes. (In his case he keeps telling me he paid more in taxes from one year to the next....well you made more money so of course you did.)

Edited July 16, 2012 by CaP'N GRuNGe

[detlef]

And that is why our country will forever be screwed up. People have realized they can vote themselves more money.

Which is absolutely true on both ends of the spectrum. It seems like, more often than not, you bring this up to reference poor folk voting themselves another handout, but do you honestly think that most on the other end is not "voting themselves more money"?

 

As far as the data presented, not being an economist, I'm not going to pretend that it points to anything in particular. I would imagine that it could mean any number of things. One that comes to mind is that, if more money is shifting to the top quintile, then a higher percentage of the population is making proportionally less, and therefor needing to take advantage of some form of government assistance. But again, I think it would be rash to assume this is the case rather than one of a number of conclusions you could draw.

[Azazello1313]

Something is clearly wrong here because I have a friend and there are also many others here it seems who have this firm believe that Obama has raised their taxes. (In his case he keeps telling me he paid more in taxes from one year to the next....well you made more money so of course you did.)

 

yeah, much more accurate to say obama has raised his kids' taxes.

[Ditkaless Wonders]

I'm getting tired of paying for others, real tired..

[nuke'em ttg]

my daughter has gotten to many scholarships and doesn't have enough need so she can't have a 0% loan she has to pay 6% for being smart, thanks CHEETO for keepin whitey down

[yo mama]

yeah, much more accurate to say obama has raised his kids' taxes.

You're complaining because the president has not raised taxes on the middle class? That bastard!

[bushwacked]

Two class warfare threads in the same day from Az? Must be getting close to election season.

[The Irish Doggy]

Now I'm no economist, but it seems to me that this result should be expected for 2008/2009. Following the links to the CBO report, average wages are down 12 percent from 2007 to 2009. I don't know all the programs that count in transfer payments, but as the US Gov attempted to stimulate the economy and paid unemployment insurance to so many people out of work, of course the Gov's side went up and the public's side went down. I don't think it is right to simply state that the people voted themselves this money directly, rather it is result of broad factors which should reverse as wages come back, unemployment decreases, and our Gov returns to a more typical brand of irresponsible spending. Unless you are of the opinion that most people enjoy pay cuts and being out of work.

 

BTW, I have Mankiw's Principles of Macro economics on my work bookshelf. It's a page turner.

[Azazello1313]

Now I'm no economist, but it seems to me that this result should be expected for 2008/2009. Following the links to the CBO report, average wages are down 12 percent from 2007 to 2009. I don't know all the programs that count in transfer payments, but as the US Gov attempted to stimulate the economy and paid unemployment insurance to so many people out of work, of course the Gov's side went up and the public's side went down. I don't think it is right to simply state that the people voted themselves this money directly, rather it is result of broad factors which should reverse as wages come back, unemployment decreases, and our Gov returns to a more typical brand of irresponsible spending. Unless you are of the opinion that most people enjoy pay cuts and being out of work.

 

BTW, I have Mankiw's Principles of Macro economics on my work bookshelf. It's a page turner.

 

that is obviously true, but it is also a direct effect of decades worth of policies out of both parties pandering to the middle class with tax cuts, tax credits, etc. it's right-wingers that tend to get fired up about this kind of thing, but the "bush tax cuts" are probably more responsible for reducing the number of net taxpayers than any other single policy to date, by increasing the standard deduction, child credits and child care credits, as well as lowering the bottom rate significantly.

 

there is a definite long term trend here, above and beyond just business cycle dynamics. notice that if you look at the actual table Mankiw refers to that in previous recessions (1982 and 2001, for example) transfers went up and taxes went down for the middle quintile, but taxes were still way above transfer payments. I'll see if the new stupid board software will let me post the columns:

 

Year Inc, ('09$) Tranfers Taxes
1979 50,500 3,100 10,400
1980 48,100 3,300 10,100
1981 47,800 3,500 10,300
1982 46,500 4,200 9,300
1983 45,700 4,100 9,000
1984 48,700 4,100 9,800
1985 49,000 4,100 9,900
1986 49,800 4,400 10,100
1987 49,200 4,200 9,800
1988 50,000 4,100 10,200
1989 50,400 4,100 10,200
1990 50,600 4,400 10,400
1991 48,900 4,700 10,000
1992 48,900 5,000 9,900
1993 49,300 5,000 10,000
1994 49,800 4,900 10,200
1995 51,500 5,000 10,600
1996 51,900 5,400 10,600
1997 53,100 5,200 10,900
1998 55,100 5,300 10,900
1999 57,000 5,500 11,300
2000 56,900 5,800 11,300
2001 56,600 6,900 10,200
2002 54,800 7,300 9,700
2003 54,800 7,400 9,100
2004 56,500 7,800 9,500
2005 57,300 8,000 9,800
2006 57,700 8,100 10,000
2007 59,800 8,200 10,300
2008 57,100 8,500 8,200
2009 54,200 10,400 7,700

 

we'll see how that comes in, but you can see that even before the current recession hit, taxes have been holding steady or going slightly down as a percent of income for this group and transfer payments have been going consistently and dramatically up.

Edited July 17, 2012 by Azazello1313

[Azazello1313]

Two class warfare threads in the same day from Az? Must be getting close to election season.

 

I am an insourcer of knowledge.

 

just so we're clear

[The Irish Doggy]

Now that is a compelling graph.

[bushwacked]

I am an insourcer of knowledge.

 

just so we're clear

 

 

This one is better!